SECTION IV – GENERAL CONDITIONS OF THE CONTRACT
1.1. In this Contract, the following terms shall be interpreted as indicated:
(a) “The Contract” means the agreement entered into between the Procuring
Entity and the Supplier, as recorded in the Contract Form signed by the
parties, including all attachments and appendices thereto and all
documents incorporated by reference therein.
(b) “The Contract Price” means the price payable to the Supplier under the
Contract for the full and proper performance of its contractual obligations.
(c) “The Goods” means all of the supplies, equipment, machinery, spare parts,
other materials and/or general support services which the Supplier is
required to provide to the Procuring Entity under the Contract.
(d) “The Services” means those services ancillary to the supply of the Goods,
such as transportation and insurance, and any other incidental services,
such as installation, commissioning, provision of technical assistance,
training, and other such obligations of the Supplier covered under the
(e) “GCC” means the General Conditions of Contract contained in this
(f) “SCC” means the Special Conditions of Contract.
(g) “The Procuring Entity” means the organization purchasing the Goods, as
named in the SCC.
(h) “The Procuring Entity’s country” is the Philippines.
(i) “The Supplier” means the individual contractor, manufacturer distributor,
or firm supplying/manufacturing the Goods and Services under this
Contract and named in the SCC.
(j) The “Funding Source” means the organization named in the SCC.
(k) “The Project Site,” where applicable, means the place or places named in
(l) “Day” means calendar day.
(m) The “Effective Date” of the contract will be the date of receipt by the
Supplier of the Notice to Proceed or the date provided in the Notice to
Proceed. Performance of all obligations shall be reckoned from the
Effective Date of the Contract.
(n) “Verified Report” refers to the report submitted by the Implementing Unit
to the Head of the Procuring Entity setting forth its findings as to the
existence of grounds or causes for termination and explicitly stating its
recommendation for the issuance of a Notice to Terminate.
2. Corrupt, Fraudulent, Collusive, and Coercive Practices
2.1. The Procuring Entity as well as the bidders, contractors, or suppliers shall observe
the highest standard of ethics during the procurement and execution of this
Contract. In pursuance of this policy, the Procuring Entity:
(a) defines, for the purposes of this provision, the terms set forth below as
(i) "corrupt practice" means behavior on the part of officials in the
public or private sectors by which they improperly and unlawfully
enrich themselves, others, or induce others to do so, by misusing
the position in which they are placed, and it includes the offering,
giving, receiving, or soliciting of anything of value to influence the
action of any such official in the procurement process or in
contract execution; entering, on behalf of the Government, into any
contract or transaction manifestly and grossly disadvantageous to
the same, whether or not the public officer profited or will profit
thereby, and similar acts as provided in Republic Act 3019.
(ii) "fraudulent practice" means a misrepresentation of facts in order to
influence a procurement process or the execution of a contract to
the detriment of the Procuring Entity, and includes collusive
practices among Bidders (prior to or after bid submission)
designed to establish bid prices at artificial, non-competitive levels
and to deprive the Procuring Entity of the benefits of free and open
(iii) “collusive practices” means a scheme or arrangement between two
or more Bidders, with or without the knowledge of the Procuring
Entity, designed to establish bid prices at artificial, non-
(iv) “coercive practices” means harming or threatening to harm,
directly or indirectly, persons, or their property to influence their
participation in a procurement process, or affect the execution of a
(b) will reject a proposal for award if it determines that the Bidder
recommended for award has engaged in any of the practices mentioned in
this Clause for purposes of competing for the contract.
2.2. Further the Funding Source, Borrower or Procuring Entity, as appropriate, will
seek to impose the maximum civil, administrative and/or criminal penalties
available under the applicable law on individuals and organizations deemed to be
involved with any of the practices mentioned in GCC Clause 2.1(a).
3. Inspection and Audit by the Funding Source
The Supplier shall permit the Funding Source to inspect the Supplier’s accounts and
records relating to the performance of the Supplier and to have them audited by auditors
appointed by the Funding Source, if so required by the Funding Source.
4. Governing Law and Language
4.1. This Contract shall be interpreted in accordance with the laws of the Republic of
4.2. This Contract has been executed in the English language, which shall be the
binding and controlling language for all matters relating to the meaning or
interpretation of this Contract. All correspondence and other documents
pertaining to this Contract exchanged by the parties shall be written in English.
5.1. Any notice, request, or consent required or permitted to be given or made
pursuant to this Contract shall be in writing. Any such notice, request, or consent
shall be deemed to have been given or made when received by the concerned
party, either in person or through an authorized representative of the Party to
whom the communication is addressed, or when sent by registered mail, telex,
telegram, or facsimile to such Party at the address specified in the SCC, which
shall be effective when delivered and duly received or on the notice’s effective
date, whichever is later.
5.2. A Party may change its address for notice hereunder by giving the other Party
notice of such change pursuant to the provisions listed in the SCC for GCC
6. Scope of Contract
6.1. The GOODS and Related Services to be provided shall be as specified in Section
VI. Schedule of Requirements.
6.2. This Contract shall include all such items, although not specifically mentioned,
that can be reasonably inferred as being required for its completion as if such
items were expressly mentioned herein. Any additional requirements for the
completion of this Contract shall be provided in the SCC.
7.1. Subcontracting of any portion of the Goods, if allowed in the BDS, does not
relieve the Supplier of any liability or obligation under this Contract. The
Supplier will be responsible for the acts, defaults, and negligence of any
subcontractor, its agents, servants or workmen as fully as if these were the
Supplier’s own acts, defaults, or negligence, or those of its agents, servants or
7.2. Subcontractors disclosed and identified during the bidding may be changed during
the implementation of this Contract, subject to compliance with the required
qualifications and the approval of the Procuring Entity.
8. Procuring Entity’s Responsibilities
8.1. Whenever the performance of the obligations in this Contract requires that the
Supplier obtain permits, approvals, import, and other licenses from local public
authorities, the Procuring Entity shall, if so needed by the Supplier, make its best
effort to assist the Supplier in complying with such requirements in a timely and
8.2. The Procuring Entity shall pay all costs involved in the performance of its
responsibilities in accordance with GCC Clause 6.
Prices charged by the Supplier for Goods delivered and/or services performed under this
Contract shall not vary from the prices quoted by the Supplier in its bid, with the
exception of any change in price resulting from a Change Order issued in accordance
with GCC Clause 29, or if applicable, adjustments authorized in accordance with the
price adjustment provisions specified in the SCC.
10.1. Unless otherwise specified in the SCC, payments shall be made only upon a
certification by the Head of the Procuring Entity to the effect that the Goods have
been rendered or delivered in accordance with the terms of this Contract and have
been duly inspected and accepted. Except with the prior approval of the President
no payment shall be made for services not yet rendered or for supplies and
materials not yet delivered under this Contract. Ten percent (10%) of the amount
of each payment shall be retained by the Procuring Entity to cover the Supplier’s
warranty obligations under this Contract as described in GCC Clause 17.
10.2. The Supplier’s request(s) for payment shall be made to the Procuring Entity in
writing, accompanied by an invoice describing, as appropriate, the Goods
delivered and/or Services performed, and by documents submitted pursuant to the
SCC provision for GCC Clause 6.2, and upon fulfillment of other obligations
stipulated in this Contract.
10.3. Pursuant to GCC Clause 10.2, payments shall be made promptly by the Procuring
Entity, but in no case later than sixty (60) days after submission of an invoice or
claim by the Supplier.
10.4. Unless otherwise specified in the SCC, the currency in which payment is made to
the Supplier under this Contract shall be in Philippine Pesos.
11. Advance Payment
11.1. Advance payment shall be made only after prior approval of the President, and
shall not exceed fifteen percent (15%) of the Contract amount, unless otherwise
directed by the President or in cases allowed under Annex “D” of RA 9184.
11.2. For Goods supplied from abroad, ten percent (10%) of the Contract price shall be
paid within sixty (60) calendar days from signing of the contract and upon
submission of a claim and a bank guarantee issued by a licensed bank for the
equivalent amount valid until the Goods are delivered and in the form provided in
Section VIII. Bidding Forms.
11.3. All progress payments shall first be charged against the advance payment until the
latter has been fully exhausted.
12. Taxes and Duties
The Supplier, whether local or foreign, shall be entirely responsible for all the necessary
taxes, stamp duties, license fees, and other such levies imposed for the completion of this
13. Performance Security
13.1. Unless otherwise specified in the SCC, within ten (10) calendar days from receipt
of the Notice of Award from the Procuring Entity but in no case later than the
signing of the contract by both parties, the successful Bidder shall furnish the
performance security in any the forms prescribed in the ITB Clause 33.2.
13.2. The performance security posted in favor of the Procuring Entity shall be forfeited
in the event it is established that the winning bidder is in default in any of its
obligations under the contract.
13.3. The performance security shall remain valid until issuance by the Procuring
Entity of the Certificate of Final Acceptance.
13.4. Unless otherwise specified in the SCC, the performance security may be released
by the Procuring Entity and returned to the Supplier after the issuance of the
Certificate of Final Acceptance subject to the following conditions:
(a) There are no pending claims against the Supplier or the surety company
filed by the Procuring Entity;
(b) The Supplier has no pending claims for labor and materials filed against it;
(c) Other terms specified in the SCC.
13.5. In case of a reduction of the contract value, the Procuring Entity shall allow a
proportional reduction in the original performance security, provided that any
such reduction is more than ten percent (10%) and that the aggregate of such
reductions is not more than fifty percent (50%) of the original performance
14. Use of Contract Documents and Information
14.1. The Supplier shall not, except for purposes of performing the obligations in this
Contract, without the Procuring Entity’s prior written consent, disclose this
Contract, or any provision thereof, or any specification, plan, drawing, pattern,
sample, or information furnished by or on behalf of the Procuring Entity. Any
such disclosure shall be made in confidence and shall extend only as far as may
be necessary for purposes of such performance.
14.2. Any document, other than this Contract itself, enumerated in GCC Clause 14.1
shall remain the property of the Procuring Entity and shall be returned (all copies)
to the Procuring Entity on completion of the Supplier’s performance under this
Contract if so required by the Procuring Entity.
The Goods provided under this Contract shall conform to the standards mentioned in the
Section VII. Technical Specifications; and, when no applicable standard is mentioned, to
the authoritative standards appropriate to the Goods’ country of origin. Such standards
shall be the latest issued by the institution concerned.
16. Inspection and Tests
16.1. The Procuring Entity or its representative shall have the right to inspect and/or to
test the Goods to confirm their conformity to the Contract specifications at no
extra cost to the Procuring Entity. The SCC and Section VII. Technical
Specifications shall specify what inspections and/or tests the Procuring Entity
requires and where they are to be conducted. The Procuring Entity shall notify
the Supplier in writing, in a timely manner, of the identity of any representatives
retained for these purposes.
16.2. If applicable, the inspections and tests may be conducted on the premises of the
Supplier or its subcontractor(s), at point of delivery, and/or at the goods’ final
destination. If conducted on the premises of the Supplier or its subcontractor(s),
all reasonable facilities and assistance, including access to drawings and
production data, shall be furnished to the inspectors at no charge to the Procuring
16.3. The Procuring Entity or its designated representative shall be entitled to attend the
tests and/or inspections referred to in this Clause provided that the Procuring
Entity shall bear all of its own costs and expenses incurred in connection with
such attendance including, but not limited to, all traveling and board and lodging
16.4. The Procuring Entity may reject any Goods or any part thereof that fail to pass
any test and/or inspection or do not conform to the specifications. The Supplier
shall either rectify or replace such rejected Goods or parts thereof or make
alterations necessary to meet the specifications at no cost to the Procuring Entity,
and shall repeat the test and/or inspection, at no cost to the Procuring Entity, upon
giving a notice pursuant to GCC Clause 5.
16.5. The Supplier agrees that neither the execution of a test and/or inspection of the
Goods or any part thereof, nor the attendance by the Procuring Entity or its
representative, shall release the Supplier from any warranties or other obligations
under this Contract.
17.1. The Supplier warrants that the Goods supplied under the Contract are new,
unused, of the most recent or current models, and that they incorporate all recent
improvements in design and materials, except when the technical specifications
required by the Procuring Entity provides otherwise.
17.2. The Supplier further warrants that all Goods supplied under this Contract shall
have no defect, arising from design, materials, or workmanship or from any act or
omission of the Supplier that may develop under normal use of the supplied
Goods in the conditions prevailing in the country of final destination.
17.3. In order to assure that manufacturing defects shall be corrected by the Supplier, a
warranty shall be required from the Supplier for a minimum period specified in
the SCC. The obligation for the warranty shall be covered by, at the Supplier’s
option, either retention money in an amount equivalent to at least ten percent
(10%) of every progress payment, or a special bank guarantee equivalent to at
least ten percent (10%) of the Contract Price or other such amount if so specified
in the SCC. The said amounts shall only be released after the lapse of the
warranty period specified in the SCC; provided, however, that the Supplies
delivered are free from patent and latent defects and all the conditions imposed
under this Contract have been fully met.
17.4. The Procuring Entity shall promptly notify the Supplier in writing of any claims
arising under this warranty. Upon receipt of such notice, the Supplier shall,
within the period specified in the SCC and with all reasonable speed, repair or
replace the defective Goods or parts thereof, without cost to the Procuring Entity.
17.5. If the Supplier, having been notified, fails to remedy the defect(s) within the
period specified in GCC Clause 17.4, the Procuring Entity may proceed to take
such remedial action as may be necessary, at the Supplier’s risk and expense and
without prejudice to any other rights which the Procuring Entity may have against
the Supplier under the Contract and under the applicable law.
18. Delays in the Supplier’s Performance
18.1. Delivery of the Goods and/or performance of Services shall be made by the
Supplier in accordance with the time schedule prescribed by the Procuring Entity
in Section VI. Schedule of Requirements.
18.2. If at any time during the performance of this Contract, the Supplier or its
Subcontractor(s) should encounter conditions impeding timely delivery of the
Goods and/or performance of Services, the Supplier shall promptly notify the
Procuring Entity in writing of the fact of the delay, its likely duration and its
cause(s). As soon as practicable after receipt of the Supplier’s notice, and upon
causes provided for under GCC Clause 22, the Procuring Entity shall evaluate the
situation and may extend the Supplier’s time for performance, in which case the
extension shall be ratified by the parties by amendment of Contract.
18.3. Except as provided under GCC Clause 22, a delay by the Supplier in the
performance of its obligations shall render the Supplier liable to the imposition of
liquidated damages pursuant to GCC Clause 19, unless an extension of time is
agreed upon pursuant to GCC Clause 29 without the application of liquidated
19. Liquidated Damages
Subject to GCC Clauses 18 and 22, if the Supplier fails to satisfactorily deliver any or all
of the Goods and/or to perform the Services within the period(s) specified in this Contract
inclusive of duly granted time extensions if any, the Procuring Entity shall, without
prejudice to its other remedies under this Contract and under the applicable law, deduct
from the Contract Price, as liquidated damages, a sum equivalent to the percentage
specified in the SCC of the delivered price of the delayed Goods or unperformed
Services for each week or part thereof of delay until actual delivery or performance, up to
a maximum deduction of the percentage specified in the SCC. Once the maximum is
reached, the Procuring Entity shall rescind the Contract pursuant to GCC Clause 23,
without prejudice to other courses of action and remedies open to it.
20. Settlement of Disputes
20.1. If any dispute or difference of any kind whatsoever shall arise between the
Procuring Entity and the Supplier in connection with or arising out of this
Contract, the parties shall make every effort to resolve amicably such dispute or
difference by mutual consultation.
20.2. If after thirty (30) days, the parties have failed to resolve their dispute or
difference by such mutual consultation, then either the Procuring Entity or the
Supplier may give notice to the other party of its intention to commence
arbitration, as hereinafter provided, as to the matter in dispute, and no arbitration
in respect of this matter may be commenced unless such notice is given.
20.3. Any dispute or difference in respect of which a notice of intention to commence
arbitration has been given in accordance with this Clause shall be settled by
arbitration. Arbitration may be commenced prior to or after delivery of the Goods
under this Contract.
20.4. Arbitration proceedings shall be conducted in accordance with the rules of
procedure specified in the SCC.
20.5. Notwithstanding any reference to arbitration herein, the parties shall continue to
perform their respective obligations under the Contract unless they otherwise
agree; and the Procuring Entity shall pay the Supplier any monies due the
21. Liability of the Supplier
21.1. Subject to additional provisions, if any, set forth in the SCC, the Supplier’s
liability under this Contract shall be as provided by the laws of the Republic of
21.2. Except in cases of criminal negligence or willful misconduct, and in the case of
infringement of patent rights, if applicable, the aggregate liability of the Supplier
to the Procuring Entity shall not exceed the total Contract Price, provided that this
limitation shall not apply to the cost of repairing or replacing defective
22. Force Majeure
22.1. The Supplier shall not be liable for forfeiture of its performance security,
liquidated damages, or termination for default if and to the extent that its delay in
performance or other failure to perform its obligations under the Contract is the
result of a force majeure.
22.2. For purposes of this Contract the terms “force majeure” and “fortuitous event”
may be used interchangeably. In this regard, a fortuitous event or force majeure
shall be interpreted to mean an event which the Contractor could not have
foreseen, or which though foreseen, was inevitable. It shall not include ordinary
unfavorable weather conditions; and any other cause the effects of which could
have been avoided with the exercise of reasonable diligence by the Contractor.
22.3. If a force majeure situation arises, the Supplier shall promptly notify the
Procuring Entity in writing of such condition and the cause thereof. Unless
otherwise directed by the Procuring Entity in writing, the Supplier shall continue
to perform its obligations under the Contract as far as is reasonably practical, and
shall seek all reasonable alternative means for performance not prevented by the
23. Termination for Default
23.1. The Procuring Entity shall terminate this Contract for default when any of the
following conditions attends its implementation:
(a) Outside of force majeure, the Supplier fails to deliver or perform any or all
of the Goods within the period(s) specified in the contract, or within any
extension thereof granted by the Procuring Entity pursuant to a request
made by the Supplier prior to the delay, and such failure amounts to at
least ten percent (10%) of the contact price;
(b) As a result of force majeure, the Supplier is unable to deliver or perform
any or all of the Goods, amounting to at least ten percent (10%) of the
contract price, for a period of not less than sixty (60) calendar days after
receipt of the notice from the Procuring Entity stating that the
circumstance of force majeure is deemed to have ceased; or
(c) The Supplier fails to perform any other obligation under the Contract.
23.2. In the event the Procuring Entity terminates this Contract in whole or in part, for
any of the reasons provided under GCC Clauses 23 to 26, the Procuring Entity
may procure, upon such terms and in such manner as it deems appropriate, Goods
or Services similar to those undelivered, and the Supplier shall be liable to the
Procuring Entity for any excess costs for such similar Goods or Services.
However, the Supplier shall continue performance of this Contract to the extent
23.3. In case the delay in the delivery of the Goods and/or performance of the Services
exceeds a time duration equivalent to ten percent (10%) of the specified contract
time plus any time extension duly granted to the Supplier, the Procuring Entity
may terminate this Contract, forfeit the Supplier's performance security and award
the same to a qualified Supplier.
24. Termination for Insolvency
The Procuring Entity shall terminate this Contract if the Supplier is declared bankrupt or
insolvent as determined with finality by a court of competent jurisdiction. In this event,
termination will be without compensation to the Supplier, provided that such termination
will not prejudice or affect any right of action or remedy which has accrued or will accrue
thereafter to the Procuring Entity and/or the Supplier.
25. Termination for Convenience
25.1. The Procuring Entity may terminate this Contract, in whole or in part, at any time
for its convenience. The Head of the Procuring Entity may terminate a contract
for the convenience of the Government if he has determined the existence of
conditions that make Project Implementation economically, financially or
technically impractical and/or unnecessary, such as, but not limited to, fortuitous
event(s) or changes in law and national government policies.
25.2. The Goods that have been delivered and/or performed or are ready for delivery or
performance within thirty (30) calendar days after the Supplier’s receipt of Notice
to Terminate shall be accepted by the Procuring Entity at the contract terms and
prices. For Goods not yet performed and/or ready for delivery, the Procuring
Entity may elect:
(a) to have any portion delivered and/or performed and paid at the contract
terms and prices; and/or
(b) to cancel the remainder and pay to the Supplier an agreed amount for
partially completed and/or performed goods and for materials and parts
previously procured by the Supplier.
25.3. If the Supplier suffers loss in its initial performance of the terminated contract,
such as purchase of raw materials for goods specially manufactured for the
Procuring Entity which cannot be sold in open market, it shall be allowed to
recover partially from this Contract, on a quantum meruit basis. Before recovery
may be made, the fact of loss must be established under oath by the Supplier to
the satisfaction of the Procuring Entity before recovery may be made.
26. Termination for Unlawful Acts
26.1. The Procuring Entity may terminate this Contract in case it is determined prima
facie that the Supplier has engaged, before or during the implementation of this
Contract, in unlawful deeds and behaviors relative to contract acquisition and
implementation. Unlawful acts include, but are not limited to, the following:
(a) Corrupt, fraudulent, and coercive practices as defined in ITB Clause
(b) Drawing up or using forged documents;
(c) Using adulterated materials, means or methods, or engaging in production
contrary to rules of science or the trade; and
(d) Any other act analogous to the foregoing.
27. Procedures for Termination of Contracts
27.1. The following provisions shall govern the procedures for termination of this
(a) Upon receipt of a written report of acts or causes which may constitute
ground(s) for termination as aforementioned, or upon its own initiative,
the Implementing Unit shall, within a period of seven (7) calendar days,
verify the existence of such ground(s) and cause the execution of a
Verified Report, with all relevant evidence attached;
(b) Upon recommendation by the Implementing Unit, the Head of the
Procuring Entity shall terminate this Contract only by a written notice to
the Supplier conveying the termination of this Contract. The notice shall
(i) that this Contract is being terminated for any of the ground(s)
afore-mentioned, and a statement of the acts that constitute the
ground(s) constituting the same;
(ii) the extent of termination, whether in whole or in part;
(iii) an instruction to the Supplier to show cause as to why this Contract
should not be terminated; and
(iv) special instructions of the Procuring Entity, if any.
(c) The Notice to Terminate shall be accompanied by a copy of the Verified
(d) Within a period of seven (7) calendar days from receipt of the Notice of
Termination, the Supplier shall submit to the Head of the Procuring Entity
a verified position paper stating why this Contract should not be
terminated. If the Supplier fails to show cause after the lapse of the seven
(7) day period, either by inaction or by default, the Head of the Procuring
Entity shall issue an order terminating this Contract;
(e) The Procuring Entity may, at anytime before receipt of the Supplier’s
verified position paper to withdraw the Notice to Terminate if it is
determined that certain items or works subject of the notice had been
completed, delivered, or performed before the Supplier’s receipt of the
(f) Within a non-extendible period of ten (10) calendar days from receipt of
the verified position paper, the Head of the Procuring Entity shall decide
whether or not to terminate this Contract. It shall serve a written notice to
the Supplier of its decision and, unless otherwise provided, this Contract is
deemed terminated from receipt of the Supplier of the notice of decision.
The termination shall only be based on the ground(s) stated in the Notice
(g) The Head of the Procuring Entity may create a Contract Termination
Review Committee (CTRC) to assist him in the discharge of this function.
All decisions recommended by the CTRC shall be subject to the approval
of the Head of the Procuring Entity; and
(h) The Supplier must serve a written notice to the Procuring Entity of its
intention to terminate the contract at least thirty (30) calendar days before
its intended termination. The Contract is deemed terminated if it is not
resumed in thirty (30) calendar days after the receipt of such notice by the
28. Assignment of Rights
The Supplier shall not assign his rights or obligations under this Contract, in whole or in
part, except with the Procuring Entity’s prior written consent.
29. Contract Amendment
Subject to applicable laws, no variation in or modification of the terms of this Contract
shall be made except by written amendment signed by the parties.
These General Conditions shall apply to the extent that they are not superseded by
provisions of other parts of this Contract.